Principles of Long Term Investment Success (2024)

FAQs

What are the 5 golden rules of investing? ›

It's about perseverance – holding firm rather than panic-selling or withdrawing your funds, and giving them time to grow instead. Take this report by J.P Morgan, for example. It shows that if you missed the best 10 days in the market between 1999-2018, your return would be cut in half.

"Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1."- Warren Buffet.

A: Five rules drawn from Warren Buffett's wisdom for potentially building wealth include investing for the long term, staying informed, maintaining a competitive advantage, focusing on quality, and managing risk.

Key Takeaways

Building wealth over time requires an understanding of how to invest wisely, safeguard assets, and manage debt.

Warren Buffet is especially well known for his 'value investing' strategy. This involves buying stocks that seem to be undervalued and selling them years later when they achieve their deserved market value.

Dollar-cost averaging is particularly useful in a long-term investment strategy. When you invest in something when its price is down, you get more units of the investment for your money, which can lower your average cost per unit. And the lower your cost to invest, the greater your potential return.

Investing can be overwhelming, but with the guidance of three fundamental pillars, you can move forward with confidence. These foundational pillars are Faith in the Future, Patience in the Presence, and Discipline in Your Decisions. Let's dig deeper into each one.

What are the four pillars of value investing? ›

In summary, The Four Pillars of Investing is an important tool for investors looking to design a more successful investment portfolio. Investors can make better financial decisions by comprehending the four pillars of theory, history, psychology, and business.

Popular investment philosophies include value investing, focusing on shares that the investor believes are fundamentally underpriced; growth investing, which targets companies that are in a growth or expansion phase; and investing in securities that provide a return in interest income.

The other determinants of investment include expectations, the level of economic activity, the stock of capital, the capacity utilization rate, the cost of capital goods, other factor costs, technological change, and public policy.

To sum it all up: Know what you're investing for, know the limits of your financial comfort zone, spread your financial prospects into different baskets, question your investment ideas and approaches every now and then, and don't let fluctuations distract you from your long-term investing goals.

1 – Never lose money. Let's kick it off with some timeless advice from legendary investor Warren Buffett, who said “Rule No. 1 is never lose money.

It is a simple rule that answers the following questions. What will be my thoughts 10 minutes later about the decisions that I make now? What will they be ten months later? And what will they be ten years later?

The 10-5-3 rule is a general guideline for investing, suggesting an allocation of 10% of your portfolio in cash, 5% in bonds, and 3% in commodities.